27 Apr 2012Australia Broadband Overview

The Australian telecommunications market was deregulated in 1997. Telstra retained market power, and as a consequence the industry remains highly concentrated. Also, promotion of competition is heavily dependent on regulatory mechanisms. The industry has seen a high level of disagreement and litigation between operators as well as ongoing disputes between the government and incumbent Telstra.

The vertical integration of Telstra has been one of the most substantial regulatory issues facing the Australian telecommunications industry and has significantly constrained competition. However, in April 2009 the Rudd government announced plans for a national fibre-to-the-premises wholesale infrastructure. This infrastructure has been described by Australia’s regulatory authority as the most momentous policy initiative in the Australian telecommunications sector since the introduction of full competition over a decade ago.

The National Broadband Network (NBN) operator will be structurally separated and will provide wholesale services on an open access basis. A digital economy requires an open broadband infrastructure, and for that to work it can only be built by a public-private company set up to oversee the management and construction of the new fibre network (NBN Co). No single retail company will have overall control of the network. Structural separation will mean the NBN operator has a clear incentive to treat access seekers on an equivalent basis. Therefore, the government’s announcement provides an opportunity to solve the difficulties arising from the vertical integration of the current incumbent, and set the foundation for a truly competitive 21st century telecommunications industry in Australia. While there have been questions regarding the business model and the investment plan, there has been widespread support for the visionary plan.

Late 2010 and 2011 have seen significant progress towards the implementation of the NBN, both in terms of infrastructure deployments and regulatory issues. Significantly, in June 2011 Telstra and Optus signed definitive agreements with NBN Co and the Commonwealth Government to participate in the roll-out of the NBN, following two years of negotiations.

While it will be several years before the full impact of the NBN is felt, it will also take several years to change the industry around. As the NBN becomes the predominant infrastructure, companies will have to reorganise themselves along new markets. This reorganisation and repositioning is already noticeable in current market activities, where the focus is moving from ARPU to market share. Prices in mobile and fixed broadband dropped significantly during 2010 and into 2011 as operators try to win as many customers as possible. These customer bases are becoming very valuable and more companies will want to do business with their customers through digital services. The telcos and ISPs are positioning themselves as attractive partners for such developments.

The Australian government’s decision to launch an AUD 43 billion national fibre-to-the-home broadband network is an unmistakable indication that broadband has been acknowledged as essential infrastructure. It fulfils a national purpose as its trans-sector multiplier effect delivers massive social and economic benefits in healthcare, education, energy and the environment.